Business valuation – more than just numbers

A business valuation isn’t just about numbers, it’s about ensuring you stay tax-efficient, compliant, and in control of your financial future. Whether you’re selling up, planning for the next generation, or facing an HMRC review, understanding when and why you need a valuation can save you from unexpected tax bills and missed opportunities. So, when exactly is a business valuation essential? Let’s have a look.

Selling Your Business

Thinking of selling your business? Before you do, you’ll need to determine its fair market value for Capital Gains Tax (CGT) purposes. An accurate valuation ensures you only pay tax on the real profit and can take advantage of tax reliefs like Business Asset Disposal Relief (BADR), potentially reducing your CGT to just 10%. However, it is important to note that the rates of BADR are increasing to 14% from April 2025 and 18% from April 2026. The right valuation could mean thousands in tax savings!

Inheritance Tax (IHT)

What happens to your business when you’re gone? If you own a business at the time of your death, it forms part of your estate and may be subject to Inheritance Tax. A professional valuation helps ensure that HMRC doesn’t overestimate the business’s worth, potentially reducing the tax burden on your heirs. Plus, certain business assets may qualify for Business Relief, which can significantly lower or even eliminate the IHT liability.

Gifting Shares

Thinking of gifting  shares to family members ? Be aware that HMRC considers this a ‘disposal’ for tax purposes, meaning a valuation is required to determine if Capital Gains Tax applies. However, with careful planning, tax-efficient succession strategies can usually defer tax liabilities.

Employee Share Schemes

Offering shares to employees through schemes like Enterprise Management Incentives (EMIs) or Company Share Option Plans (CSOPs) is a fantastic way to motivate your team. But before you start handing out equity, you’ll need a business valuation to determine the fair market value of the shares. This ensures compliance with HMRC and prevents any unexpected  tax demands  for  your employees.

HMRC Investigations

No one wants to be caught in a HMRC dispute over the value of their business. Whether it’s a challenge to your reported tax liability, a valuation for inheritance purposes, or a disagreement over a business sale, having an independent valuation in hand can be the key to defending your position and avoiding unexpected tax bills.

Mergers, Acquisitions & Restructuring

Merging with another company? Restructuring your business? Acquiring a competitor? A valuation is crucial for tax planning in these situations, as it determines how gains are reported, how goodwill is treated, and whether any tax reliefs apply. The last thing you want is a restructuring plan that leads to unnecessary tax costs.

Planning to retire? Before you step away, you’ll need a solid valuation to structure your exit in the most tax-efficient way possible. Whether you’re selling shares, transferring ownership, or liquidating assets, a well-timed valuation helps you minimise tax liabilities and maximise your financial return.

Don’t Leave It to Chance

A business valuation isn’t just a box-ticking exercise, it’s a powerful tool that can shape your financial future. Whether you’re selling, planning for succession, or facing an HMRC challenge, having an accurate valuation ensures you remain tax-efficient and legally compliant.

Next steps for your business valuation

If you need a valuation or have any queries in this regard, please get in touch. ETC can make sure you are prepared for whatever comes next so please get in touch.

Intro

The company was growing quickly and profits were increasing year on year. To incentivise employees the management wanted to put in place a share scheme.

Issue

The management wanted the up-front cost to be as low as possible. Unfortunately advance assurance from HMRC was not available.

How we solved it

We suggested issuing various classes of growth shares to the employees at nominal value. These shares only had value once a certain hurdle rate had been reached in the future which meant that on issue the shares only had par value.

The outcome

The employees were able to sell shares once significantly above the hurdle and achieve capital gains tax treatment(and a 20% tax rate) rather than income tax treatment under the Employment Related Securities legislation (at tax rates of up to 8.75%/33.75%).

Major changes to the existing non-domicile (non-dom) rules!

As of the start of the new tax year (6 April 2025), there are major changes to the existing non-domicile (non-dom) rules, which could have a significant impact on non-UK nationals who have lived in the UK for a number of years, as well as UK residents wishing to move abroad permanently. These changes are designed to phase out the long-standing non-dom tax advantages that have allowed individuals to exclude foreign income, gains, and assets from the scope of UK tax.

What Are the Current Non-Domicile Rules?

Non-doms are people who live in the UK but have a permanent home (domicile) in another country. For years, this meant that individuals could pay less/no tax in the UK on foreign income and capital gains, unless they brought those funds (remitted) to the UK. It also exempted overseas assets held from UK inheritance tax (IHT). This system attracted wealthy individuals from abroad to settle in the UK.

For UK citizens, it has often been difficult to obtain “non-dom” status as HMRC will usually take the view that, no matter how long an individual has remained abroad, their true “home” is still in the Uk and therefore remain UK domiciled.

Upcoming Changes to the Non-Domicile Rules

The new rules will look to tax individuals based on their residence status, rather than their domicile. Starting in April 2025, non-doms will no longer be able to claim the remittance basis indefinitely. After a certain period, non-dom individuals will be taxed on their worldwide income and gains, just like other UK tax residents.

One of the most significant changes is that individuals who have lived in the UK for a significant amount of time will no longer get advantageous tax treatment for offshore income and assets. HMRC will tax individuals based on how long a person has been a UK resident, rather than on their domicile status.

The Four-Year Foreign Income and Gains Regime

The new system introduces a ‘Foreign Income and Gains’ (FIG) regime for people returning to the UK after living abroad. If someone has been a non-UK tax resident for at least 10 years, they can use this regime for up to four years upon their return. During this period, they will not pay tax on foreign income or gains unless they bring those assets into the UK. After those four years, their worldwide income and gains will be taxed like that of any other UK resident.

The Temporary Repatriation Facility (TRF)

Another new concept and opportunity for non-doms is the TRF. This allows individuals to bring foreign income and assets into the UK at a reduced tax rate. For income or gains that have not been brought into the UK by April 2025, individuals can move funds to the UK at a tax rate of 12% during the 2025/2026 & 2026/27 UK tax years, rising to 15% in 2027/2028. This offers a window for non-domicile to bring foreign income and gains back into the UK with a reduced tax rate, but it is only available for assets held before the new rules take effect.

Changes to Inheritance Tax Rules

In addition to changes in income and capital gains tax, HMRC are also changing the inheritance tax (IHT) rules. As of 6 April 2025, UK residents will be liable for IHT on global assets if they have been a UK resident for 10 out of the last 20 years. This is a significant change, as it means that long-term UK residents will be taxed on their worldwide assets when they pass away, including those held abroad.

If someone leaves the UK after being a resident for a long period of time, HMRC can still tax their estate for a number of years. The length of time UK inheritance tax applies after someone leaves depends on how long they have lived in the UK. In short, individuals who have been UK residents for 10 years or more will have ongoing tax obligations for years, even after they leave.

Conclusion

Assets situated in the UK will always be subject to IHT, regardless of an individual’s residence status. However, these changes mark a significant shift in how the UK taxes foreign income, gains, and assets. Non-Domicile will no longer have the same tax advantages, and their worldwide income and wealth will become subject to UK tax once they meet certain residence bases criteria. While these changes may be challenging for those who have relied on the non-dom system previously, there are still opportunities to minimise UK tax exposure with the correct planning in place, particularly with the TRF and the FIG regime.

One positive planning point is that for those individuals intending to retire or move abroad permanently, there is now a clear understanding, set out in legislation, that after a maximum of ten years’ residence abroad as UK individual can be regarded as non-UK domiciled.

Next Steps

With the major changes to the existing non-domicile (non-dom) rules it is important to gather the correct tax advice to avoid costly mistake.  Please contact ETC Tax for further guidance.

In today’s fast-paced business world, attracting and keeping top talent is more challenging than ever. Companies need to offer more than a competitive salary—employees want to feel invested in their workplace. That’s where share schemes come in. These schemes not only motivate employees by giving them a direct stake in the company’s success but also provide valuable tax benefits for both the business and its workforce. But with so many options available, how do you choose the right one? Let’s look at the most popular share schemes in the UK.

Types of Share Schemes

1. Save As You Earn (SAYE) – A Risk-Free Way to Invest

Imagine a savings account that rewards you with discounted company shares at the end—this is essentially how SAYE works. Employees commit to saving a fixed amount every month (up to a maximum of £500) over a three- or five-year period. At the end of the term, they can use their savings to buy shares at a pre-agreed price, often at a discount – HMRC will allow a discount of up to 20%. The best part? No Income Tax or National Insurance (NI) is due on the difference between the purchase price and market value, and Capital Gains Tax (CGT) only applies when selling the shares. For those looking for a low-risk, disciplined way to invest in their company, SAYE is a solid choice.

2. Share Incentive Plans (SIPs) – Encouraging Long-Term Commitment

For companies looking to promote a culture of ownership, SIPs provide an excellent solution. Employees can receive shares through various means: Free Shares awarded by the company, Partnership Shares purchased by the employee, Matching Shares provided by the employer as a bonus, and Dividend Shares reinvested from dividends earned. The longer shares are held within the SIP, the greater the tax benefits. If employees keep their shares for at least five years, they won’t have to pay Income Tax, NI, or CGT when they sell them. Employers also benefit from Corporation Tax relief. SIPs are a great way to align employees’ interests with the long-term success of the business.

3. Enterprise Management Incentives (EMIs) – The SME Powerhouse

For small and medium-sized enterprises (SMEs), EMIs are one of the most tax-efficient ways to reward key employees. Under this scheme, employees receive share options at a pre-agreed price, without having to pay Income Tax or NI at the time of the grant. When they eventually sell their shares, they only pay CGT—often at a reduced 10% rate if they qualify for Business Asset Disposal Relief (BADR). However, please note the rate of BADR is increasing to 14% from April 2025 and 18% from April 2026. Employers can also claim Corporation Tax relief. EMIs are designed to help smaller businesses attract top talent without the high upfront costs of traditional salary increases.

Click here for further reading on EMI

4. Company Share Option Plan (CSOP) – A Flexible Middle-Ground

Larger companies that don’t qualify for EMIs often turn to CSOPs. This scheme allows employees to purchase shares at a set price, with tax advantages if they meet the required holding period. However, the purchase price of these shares is restricted to £60,000 due to the savings from the relief Employees won’t pay Income Tax or NI if they hold their options for at least three years before exercising them. While CGT applies on sale, tax relief may be available. Employers also benefit from Corporation Tax relief. CSOPs are ideal for businesses looking for a structured yet flexible share incentive plan that works across different employee levels.

5. Growth Shares & Unapproved Share Schemes – A Tailored Approach

Not every business qualifies for HMRC-approved share schemes, but that doesn’t mean they can’t offer equity incentives. Growth shares allow employees to benefit from future increases in company value while starting at a lower initial valuation, which helps reduce tax liabilities. Unapproved share schemes, on the other hand, offer more flexibility but come with higher tax costs, with Income Tax and NI due upon exercise. While less tax-efficient, these schemes can be structured to suit fast-growing businesses looking for bespoke incentive plans.

How to Choose the Right Scheme

Selecting the right share scheme depends on several factors. Company size plays a key role – EMIs are perfect for SMEs, whereas larger companies may benefit more from CSOPs or SIPs. Employee retention goals also matter; if a company wants to encourage long-term loyalty, a scheme like SIPs might be ideal. Tax efficiency is another crucial aspect – approved schemes typically offer greater tax benefits than unapproved ones.

Share schemes aren’t just about financial incentives, they create a sense of ownership, motivation, and alignment between employees and the business. Whether you’re an employer looking to implement a tax-efficient reward scheme or an employee considering participation or already participating, understanding the tax implications is crucial. With the right planning and advice, share schemes can be a game-changer for both businesses and their teams.

Want to explore the best share scheme for your company? Please contact us to arrange a free consultation call.

Your Smart Guide to 2024/25 tax year end

As the tax year-end approaches, it’s a good time to make the most of any tax saving opportunities available.

Whether it’s ISAs, pensions, investment reliefs, or estate planning, getting ahead now can help to save you or your clients a lot in the long run.

We have considered below some strategies, that may help you wrap up your financial year in style.

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Think of your Individual Savings Account (ISA) allowance as a “use it or lose it” deal. For 2024/25, you can save up to £20,000 tax-free, but if you don’t use it by 5th April, you can’t carry this forward.

With changes to dividend and capital gains tax, ISAs are more valuable than ever. Plus, who doesn’t love tax-free growth?

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Investment Reliefs with EIS, SEIS, and VCTs

If you’re open to a bit of risk for some generous tax reliefs, the Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS), and Venture Capital Trusts (VCTs) are worth a look. These schemes encourage investment in early-stage businesses with generous tax incentives:

• EIS – 30% income tax relief on up to £1 million per year, plus capital gains tax (CGT) deferral.
• SEIS – 50% income tax relief on up to £200,000, with additional CGT reinvestment relief.
• VCTs – Tax-free dividends and 30% income tax relief on investments up to £200,000.

While these can be beneficial, they come with higher risks, so we recommend obtaining professional investment advice before taking action.

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The annual allowance for tax-free pension contributions is £60,000 for the current tax year. If you haven’t used your full allowance from the past three years, you can carry it forward until 5th April 2025. However, high earners need to watch out—your allowance could be tapered down if your income exceeds £200,000.

Please note, we recommend weighing this up against the inheritance tax changes from April 2027 that might impact your beneficiaries.

If you are unsure what is the best saving strategy for you, please do not hesitate to get in touch.

 

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Reducing your Income Tax bill

Earning over £100,000? Watch out for the 60% tax trap—as your personal allowance gets phased out, your effective tax rate increases.

A few potential options on lowering your tax liability include:

• Pension contributions – Reduce taxable income while saving for the future.
• Gift Aid donations – Cut your tax bill and support a good cause.
• Dividend and savings tax allowances – Make the most of the tax-free thresholds.
• Spouse and family tax planning – Reallocating income to use both partners’ allowances efficiently.

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If you want to pass on wealth in a tax-efficient manner, you could consider some of the strategies below:

• Gift up to £3,000 tax-free annually – Plus, smaller gifts of £250 per person don’t count toward IHT.
• Gifting for weddings – Up to £5,000 for a child’s wedding is free of IHT.
• Seven-year rule – Gifts made seven years before death escape IHT, provided you survive the full period.
• Trusts and Family Investment Companies (FICs) – These can be great options to explore for structuring wealth to maximise tax efficiency.

 

 

 

Final Thought…

The tax year-end is a great opportunity to tidy up your finances, potentially reduce your tax bill, and boost your savings.

Whether it’s maxing out ISAs, making pension contributions, optimising CGT, or planning for inheritance tax, a little strategy now can help lead to savings in the future.

We recommend seeking advice before implementing any of the above strategies. If you have any questions concerning the above, please do not hesitate to get in touch.

Q

I have a client who has a non-trading holding company who is a 100% shareholder of their other company. As the holding company is not trading, it doesn’t have a bank account and they pay the costs associated with maintaining the holding company, e,g. confirmation statement or accounts preparation directly from the subsidiary.

My question is can the subsidiary claim these costs in their accounts as allowable for corporation tax? Or are these dis-allowable for the subsidiary and the fact the subsidiary pays for these things is rather some sort of intercompany loan between the two companies?

A

In order for the costs to be deductible in the subsidiary, they would need to be incurred wholly and exclusively for the subsidiary’s trade. This is not the case here as they are expenses relating to the holding company.

The expenses would therefore either need to be disallowed if there is no likelihood of recovering them from the holding company, or treated as a loan between the two which the subsidiary could expect future repayment for.

Q

If someone wants to make a personal contribution to bring down their tax does it have to be done before 6/4/25?

A

For the personal pension contribution to be treated as made within the 24/25 tax year, the payment must be made prior to 6/4/25. This would differ if the payment was due to be paid under direct debt before 5/4/25 but wasn’t because the date fell on Saturday, Sunday, or a Bank holiday.

HMRC have some useful guidance here on payments made at the start and end of the tax year. I am specifically looking at ‘Rules regarding member contributions made at the start or end of a tax year or pension input period’: PTM041000

Q

A service company has ceased to trade and is ready to be closed. There is £12,000 left in the company. The ordinary shares are owned 50:50 by husband and wife. Wife is a higher rate taxpayer, husband has no 2024/25 income. Can the wife gift her ordinary shares to her husband, so a dividend can be paid only to him and which will be fully covered by his personal allowance? Immediately after the dividend is paid, an application to close the company will be made.

A

As you will be aware, a husband and wife who are living together will be able to make a no gain no loss transfer for CGT – s58 TCGA 1992. As such the dividend to him will only be taxed on him. It appears that they might not need two annual exemptions for CGT so having all of the shares in his name would not be an issue there. The income shifting provisions do not appear to bite here either. It is a disposition in value for IHT but it is also between spouses so there is no issue  – s98 IHTA 84. Your expected answer is correct.

If so, are your clients aware of the tax compliance requirements for the individual and their employer?

If you are an individual…

Going to work abroad can be a confusing time from a tax point of view. Many employees look to their employers for guidance and support. Here are some of the things they will need to think about…

UK Tax Residence Status – HMRC’s Statutory Residence Test (SRT) will need to be applied to determine their UK tax obligations.

Split Year & Double Tax Treaty Rules – this is critical for those arriving to/leaving the UK in the middle of a tax year (6th April-5th April).

Other Taxes – There may also be Capital Gains Tax (CGT) and Social Security implications.

If you are an employer…

The employer also needs to consider their position particularly where they have employees joining them from overseas, including:

PAYE Compliance – PAYE applies from day one for UK workdays. Misunderstanding this can lead to compliance failures.

Cross-Jurisdictional Considerations – employers need to ensure tax requirements are met in all relevant jurisdictions.

How can ETC Tax help with internationally mobile employees?

• Expert Support

  We can ensure your clients’ tax affairs are properly managed.

  Clients will have the confidence and peace of mind of professional support, whilst being reassured that they have done everything they need to from a compliance point of view.

  Proactive Risk Management

  Acting early will ensure clients avoid HMRC issues and costly corrections. We help mitigate risk by providing timely advice and support.

  Tailored Services

  We offer customised support to fit your clients’ business needs, from initial consultations to ongoing UK tax compliance assistance.

About us

ETC Tax is a specialist tax advisory firm with Big 4 accountancy firm experience.

We have specialists in global mobility issues such as this. We focus on providing tax support to SMEs, and OMBs, making us uniquely qualified to meet your specific needs.

Other services include :-

• Advice on succession planning and exit
• R&D
• Advice on share schemes and employee incentivisation
• Reorganisations
• International tax issues

Next Steps

If you’d like to learn more about how we can help you assist your clients with their small business needs regarding globally mobile employees, or any of our other service offerings, we’d be happy to help. Please contact [email protected], quoting ETCUK25 for a 10% discount against any work we do for you.

Globally Mobile Employees

In an increasingly global workforce, many businesses find themselves with employees moving across borders, whether UK-based employees working overseas or international employees coming to the UK. However, both individuals and employers need to be aware of the various tax compliance requirements associated with these moves.

Key Considerations for Individuals Working Abroad or Moving to the UK

For employees, relocating to another country for work can be complex from a tax perspective. Many individuals look to their employers for guidance on managing their tax obligations. Here are some essential aspects to consider:

UK Tax Residence Status

HMRC’s Statutory Residence Test (SRT) determines an individual’s UK tax obligations. Understanding residence status is crucial for ensuring tax compliance. Generally speaking, as a non-UK tax resident you will be taxable on your UK-sourced income and UK workdays. As a UK tax resident, you will be taxable on your worldwide income and gains. Therefore, is it essential to understand your UK tax residence status to ensure your income is correctly reported to HMRC and taxed accordingly.

Split Year & Double Tax Treaty Rules

If an individual arrives in or leaves the UK midway through the tax year, these rules help establish how their income will be taxed in different jurisdictions. Split Year rules can mean that the UK tax year is split into a period of residence and non-residence and Double Tax Treaties can be used to determine which country will get primary taxing rights where there are multiple jurisdictions involved.

Other Tax Considerations

In addition to income tax, employees may also need to navigate Capital Gains Tax (CGT) and Social Security implications, which vary depending on the country of relocation.

Employer Obligations for Overseas Employees

For employers, having employees move across borders comes with tax responsibilities. Businesses need to ensure compliance with UK and international tax laws, with a particular focus on the following:

• PAYE Compliance
  • UK Pay As You Earn (PAYE) tax obligations apply from an employee’s first working day in the UK. Failing to meet PAYE requirements can lead to compliance issues and potential penalties.

• Cross-Jurisdictional Considerations
  • Employers must assess tax obligations not just in the UK but also in other relevant jurisdictions where their employees work. This includes managing employer social security contributions and ensuring proper tax filings in all applicable countries.

How ETC Tax Can Help

Managing tax compliance for globally mobile employees can be challenging, but ETC Tax provides expert guidance and tailored support to help businesses navigate these complexities. We can ensure both you and your employees meet tax obligations, giving employees confidence and employers peace of mind. Addressing tax matters early helps avoid HMRC scrutiny and costly corrections. Our team provides strategic advice to mitigate risks.

Whether you need an initial consultation or ongoing UK tax compliance support, we offer customised solutions to fit your business needs, including assistance with self-assessment tax returns.

Next Steps

If you need expert guidance on tax compliance for globally mobile employees, or any of our other tax advisory services, contact us today at [email protected]. Head over to our website for more information too on international issues.

The Power of Peer-to-Peer Networking Over Breakfast

There’s something special about starting the day with great conversations over coffee—perhaps even a bacon buttie!

On Thursday 13^th March, we had the pleasure of hosting our latest ‘Breakfast Club’ at West Beverly, Altrincham, bringing together professionals from the legal and financial sectors. The turnout was just right, and it was great to hear positive feedback from attendees.

At ETC Tax, we believe that networking doesn’t have to be overly formal, in most events we host we usually opt for a more relaxed approach. Our Breakfast Club is by invite only and is designed to be a chilled, welcoming environment where professionals can connect, exchange ideas, and build meaningful relationships. We see great value in peer-to-peer networking, it’s great for sharing knowledge and creating opportunities that might not arise in more traditional networking settings.

Why Local Networking Matters

In an increasingly digital world, face-to-face interactions remain incredibly valuable. Engaging with peers in your local area helps to:

Build Stronger Relationships – Regular in-person meetings create a sense of familiarity and trust that digital connections often lack.

Exchange Knowledge & Insights – Discussing challenges and solutions with industry peers can provide fresh perspectives.

Uncover Business Opportunities – Many partnerships and collaborations begin with a simple coffee chat (oh and have we mentioned we feed you at our breakfast club)

Stay Connected to Local Trends – Being active in your professional community helps you stay ahead of developments that impact your industry and region.

What Makes Breakfast Club Unique?

Our Breakfast Club networking events are designed to be very relaxed and informal, with no agenda. It’s all about getting to know people who work in similar businesses in the local (Altrincham, Hale, Sale, and Timperley) area.

What Type of People Attend?

This event is aimed at everyone from trainees through to senior managers and directors.

Note that whilst business owners are welcome to attend, our MD, Angela, is in the process of setting up separate peer-to-peer events for partners, business owners, and key decision-makers. If this is you, or you think one of your colleagues may be interested in this type of event, please send us a separate email, and we will send more details in due course.

We host Breakfast Club as part of our commitment to encouraging meaningful conversations within the legal and financial sectors.

This event is invite only however if you’d like to join us next time please email [email protected] and we can add you to our list. Places are limited and we try not to allow more than 2 people from your company  attend, places are allocated on a first come first served basis.